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Detroit's more than 21,000 pensioners may have preserved a significant share of their retiree health care benefits under a settlement-in-principle reached last night in mediation talks surrounding the city's bankruptcy.

Details of the settlement deal, which runs through the end of 2014, are expected in a joint statement by the city and its Official Committee of Retirees later today.

A source who asked not to be identified told Crain's the deal improves "by a significant chunk" the amount Detroit agrees to pay out on its health benefits, compared to the city's original position.

Sam Albert, a partner in the Restructuring, Insolvency and Bankruptcy group at the Dentons law offices in Washington, D.C., who represented the retiree committee, could not be immediately reached for comment.

Detroit Emergency Manager Kevyn Orr has previously proposed giving retirees under 65 a $125 monthly stipend to use toward buying health insurance to comply with the federal Affordable Care Act, or shifting those over 65 to Medicare.

Other post-employment benefits, or health care costs for retirees, have been estimated to account for $5.7 billion of the city's reported $18 billion in debt when it sought bankruptcy protection July 18.

The retiree committees and several unions have filed a lawsuit in U.S. District Court appealing U.S. Bankruptcy Court Judge Steven Rhodes' Dec. 3 finding that the city is eligible for bankruptcy, and the parties agree to dismiss that lawsuit under the new agreement.

"The settlement was reached after intensive bargaining sessions over the past few weeks, sessions in which the interest of all parties were fully and vigorously represented and all issues robustly negotiated," the mediators' statement reads. "The mediators are privileged and pleased to be able to play a constructive role in assisting the parties to find common ground … ."

Attorneys in mediation talks also received a draft plan of adjustment from the city earlier this week, which proposes ways to restructure Detroit’s debt for more than 100,000 creditors. But that plan is not expected to be submitted until negotiators can review it and make recommendations over the next two weeks.